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How to Start a Buy Here Pay Here Dealership Image

Launching a BHPH Dealership: Key Steps to Success


5 min read

July 13, 2022

Are you considering starting a buy here pay here (BHPH) dealership? In this article, we'll discuss the basics of a BHPH dealership, the pros and cons of this type of business, and the critical steps you'll need to take to get started.

What is a Buy Here Pay Here Dealership?

A Buy Here Pay Here (BHPH) auto dealership offers in-house financing for customers who cannot secure traditional financing due to poor credit scores or no credit history. In a BHPH dealership, the dealer acts as the lender and provides financing directly to the buyer. This means the buyer makes payments directly to the dealership rather than to a third-party lender.

BHPH dealerships typically cater to buyers looking for affordable transportation options but may not be able to secure financing through traditional lenders. These buyers may have low credit scores, a history of missed payments, or limited credit history. BHPH dealerships offer an alternative financing option to these buyers, allowing them to purchase a vehicle they may not be able to obtain through traditional financing.

One of the key advantages of a BHPH dealership is that it enables buyers to buy a car without going through the time-consuming and often frustrating process of securing financing from a bank or credit union. Instead, the buyer can work directly with the dealer to obtain the funding, making the process quicker and more straightforward.

BHPH dealerships often offer flexible payment options, allowing buyers to make payments that fit their budget and schedule. However, working with a BHPH dealership also has some potential drawbacks. Because these dealerships often work with buyers with poor credit or little credit history, they may charge higher interest rates and fees than traditional lenders. This can make financing a vehicle through a BHPH dealership more expensive than investing through a conventional lender.

In addition, if a buyer fails to make payments on time, the dealer has the right to repossess the vehicle, which can be a stressful and disruptive experience. Despite these potential drawbacks, BHPH dealerships can be a valuable resource for buyers who cannot obtain financing through traditional channels. By offering in-house financing, BHPH dealerships provide a way for these buyers to purchase a reliable vehicle and improve their credit scores over time.

Pros and Cons of a Buy Here Pay Here Dealership

Like any business venture, there are pros and cons to opening a BHPH dealership. Let's take a closer look:


  • In-house financing accounts for 10% of total vehicle sales per year.
  • You can offer flexible lending options.
  • You can serve a wide range of customers and help improve their credit.
  • The profits you gain from the loan maturation can be significant.
  • You can adjust your interest rates as necessary.
  • You can become part of the fabric of your community by providing this service well.
  • You have more control over the financing process.
  • You can offer to finance buyers who may not qualify for traditional financing.
  • You can build a loyal customer base.
  • You can sell vehicles at a higher price point.


  • A significant financial risk is a potential barrier to entry.
  • Your ability to judge creditworthiness is a critical skill for a BHPH dealer.
  • You can lose money quickly if you don't have a strong understanding of the accounting involved.
  • You need to be patient, primarily if you use a flooring company.
  • Your current DMS system probably does not handle BHPH.
  • The interest rates you charge can be high, which may deter some buyers.
  • Your inventory may be more limited than a traditional dealership.
  • Repossessing vehicles can be a difficult and unpleasant process.
  • You may face more legal and regulatory compliance requirements.
  • Building a positive reputation can be challenging due to negative stereotypes surrounding BHPH dealerships.

Who Should Start a Buy Here Pay Here Dealership?

Starting a BHPH dealership is an opportunity for those with a passion for helping people with poor credit or no credit history to improve their financial situation by owning a reliable vehicle. As a BHPH dealer, you can help those who may not have access to traditional financing, which can be a great way to support your community. Moreover, having a BHPH dealership can help those who struggle to find and keep employment, as a reliable vehicle is often necessary for transportation to work. In this way, you can significantly impact the local economy by providing affordable and reliable transportation options to the members of your community.

However, it's essential to remember that operating a BHPH dealership requires a certain level of business acumen and the ability to assess creditworthiness and manage risk. Therefore, those considering starting a BHPH dealership should have a solid understanding of business management, finance, and accounting and a commitment to serving their community. Additionally, you should clearly understand the legal and regulatory requirements involved in operating a BHPH dealership.

How to Start a Buy Here Pay Here Dealership

If you're interested in starting a BHPH dealership, here are some critical steps you'll need to take:

Capital & Compliance

Starting a BHPH dealership requires significant capital investment to purchase a car inventory ranging from $1,000 to $15,000. It's essential to carefully consider the costs and ensure they fit your budget. It's important to note that in a BHPH model, the dealer provides the car to the buyer with no more than the money down and a promise to make payments.

Additionally, you must comply with local underwriting guidelines to ensure your contracts are legally binding and enforceable. Failure to comply with these guidelines can result in significant legal and financial consequences for your business. It's essential to clearly understand these requirements and ensure that your dealership fully complies.

Market Fit

Market fit is a critical aspect of starting a successful BHPH dealership. To determine if there is enough demand in your area to support your business, you must thoroughly research the local demographics. Remember that the average BHPH buyer is usually working-class or working-poor, around 35 years old, and may have poor or no credit history.

Additionally, seniors living on a fixed income and young people working entry-level jobs are well represented in this group. Research your area's income levels, credit scores, and employment rates to get a more accurate reading of the local demand for BHPH vehicles. You can also look at the number of existing BHPH dealerships in your area to indicate the market's strength. It's important to note that opening a BHPH dealership in a room with little to no demand can lead to financial losses and business failure. Therefore, conducting thorough research on your local market is crucial before investing in your BHPH dealership.

Sales Team

A successful BHPH dealership relies heavily on its sales team to make profitable deals and create positive customer relationships. Unlike traditional dealerships, BHPH dealerships require unique skills from their sales staff due to the increased financial risk involved in lending money directly to customers. The ideal sales team members for a BHPH dealership should possess excellent communication skills, be empathetic, and be able to establish rapport with customers. They should be able to assess a customer's creditworthiness and evaluate their ability to make timely payments.

Sales staff should also have experience in the finance industry and be knowledgeable about the various lending options available to customers. It's essential to provide proper training for your sales team to ensure they can perform their job effectively. The training should focus on customer service, credit analysis, and the specifics of in-house financing. Creating a positive and supportive work environment can help foster a team culture focused on helping customers rather than simply making sales.

Another critical factor in building a successful sales team is compensation. BHPH dealerships often offer commission-based compensation structures that reward sales staff for successfully closing deals and ensuring customer satisfaction. Providing incentives can also help motivate sales staff to meet and exceed their sales goals, contributing to the dealership's overall success.

BHPH Software

BHPH software is explicitly designed to meet the needs of buy here pay here dealerships. This software can help manage the loan servicing process, including credit checks, loan approvals, collections, and accounting. Unlike traditional dealer management systems (DMS), BHPH software has the tools to manage a BHPH car lot. Using BHPH software can streamline your operations and help you stay on top of critical tasks such as processing payments, managing inventory, and generating reports.

With BHPH software, you can also automate many of your day-to-day tasks, freeing up time for you and your team to focus on other aspects of the business. When choosing BHPH software, selecting a platform that meets your specific needs is essential. Look for software that offers automatic payment processing, inventory tracking, and customer management tools. Considering the software's pricing, ease of use, and customer support options would be best.

Overall, BHPH software can be invaluable for managing your dealership's finances and ensuring compliance with industry regulations. With the right software in place, you can run your BHPH dealership more efficiently and effectively, allowing you to focus on growing your business and helping your customers improve their credit.

Floor Planning

Floor planning is a crucial aspect of running a successful BHPH dealership. As mentioned, it involves financing the purchase of vehicles you sell on your lot. This means you can have a more extensive selection of cars for your customers without having to tie up all your capital in inventory. However, it's important to note that the interest rates for floor planning can be high, so shopping around for the best rates is essential.

Additionally, it's important to consider the impact of interest rates on your bottom line. Higher interest rates can mean higher costs for you, reducing your profits. To make the most of floor planning, it's essential to have a plan in place for purchasing vehicles and stocking your lot. This involves carefully analyzing the market to determine which vehicles are in demand and establishing relationships with reliable suppliers.

You'll also need to consider the logistics of managing your inventory, including how you'll track and maintain each vehicle. Effective floor planning can help you increase your inventory and grow your business, but managing this aspect of your operations carefully to avoid financial risks is essential. By working with reputable lenders and carefully managing your inventory, you can build a successful BHPH dealership that provides a valuable service to your community.


Ensuring compliance is one of the most important aspects of running a BHPH dealership. Failure to comply with regulations can result in legal consequences, including fines and even losing your operating license. Therefore, it's essential to stay informed about federal, state, and local regulations that apply to your business.

The Truth in Lending Act (TILA) requires that all lenders disclose the full cost of credit to borrowers uniformly, including the annual percentage rate (APR) and all fees associated with the loan. The Fair Credit Reporting Act (FCRA) governs how credit reporting agencies collect and use consumer credit information. The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating against borrowers based on race, gender, religion, national origin, age, or marital status.

To ensure compliance, it's a good idea to consult a lawyer specializing in the auto finance industry. A lawyer can help you understand your legal obligations and keep you up-to-date on any changes to the law that may affect your business. It's also essential to establish compliance procedures within your dealership, such as regular training for staff on regulatory requirements and record-keeping practices. By prioritizing compliance, you can protect your business and ensure you provide your customers with fair and transparent financing options.


Marketing is crucial for any business and is no different for BHPH dealerships. Once you have established your dealership, you must get the word out to attract customers. Word of mouth is one of the most effective ways to do this. Satisfied customers can become brand ambassadors, spreading the word about your dealership to their families and friends.

Therefore, providing excellent customer service and building a reputation as a reliable and trustworthy dealer is essential. In addition to word of mouth, you can use digital marketing strategies to attract new customers. Search engine optimization (SEO) effectively increases your online visibility and drives traffic to your website. Optimizing your website for search engines ensures potential customers can find you when searching for BHPH dealerships in your area.

Social media is another powerful marketing tool that can help you reach a wider audience. You can engage with potential customers and build relationships by creating a solid social media presence. You can also use social media to showcase your inventory, promote special offers, and share customer success stories.

Other marketing strategies include direct mail, print advertising, and local event sponsorships. Ultimately, the key to successful marketing is clearly understanding your target audience and tailoring your marketing efforts to meet their needs and preferences.


Starting a BHPH dealership requires careful consideration and planning. While the potential to help people who may not qualify for traditional financing is significant, the risks and challenges associated with this business should not be underestimated. One of the considerable advantages of BHPH dealerships is that they offer in-house financing, allowing buyers with poor credit or no credit history to purchase a vehicle. In-house financing accounts for 10% of total vehicle sales per year, and the percentage of total vehicle sales purchased from BHPH dealers has increased for the past five years.

Additionally, BHPH dealerships have the flexibility to offer lending options to serve a wide range of customers and adjust interest rates as necessary. On the other hand, starting a BHPH dealership comes with significant financial risks, including the cost of inventory and the potential for quick loss of money if there is a lack of understanding of accounting. It's also essential to have a sales team that can assess a customer's creditworthiness, and specialized software is necessary to manage loan servicing, underwriting, collections, and accounting.

Compliance is critical in the BHPH industry, and staying up-to-date with federal, state, and local regulations is essential. Hiring a lawyer specializing in the auto finance industry can help ensure compliance. Once established, marketing strategies such as word of mouth, excellent customer service, and digital marketing can help attract new customers.

In conclusion, a BHPH dealership can be a challenging but rewarding venture for those passionate about helping their community. With careful planning, a dedicated team, and a thorough understanding of the risks and challenges, a successful BHPH dealership can provide a valuable service to the community.

Check out our buy here pay here dealer software to get started today!

Author's Name
By Joshua Aaron. Written in Los Angeles.